TravelCenters of America (NASDAQ:TA) appears to offer investors a good deal on its shares at under nine times forward earnings, but what are investors buying into? The interstate fuel stop and truck servicing business is in a growing market as the trucking industry is only picking up, but high costs could keep earnings limited. Nonetheless, in the company's recently reported earnings, TravelCenters missed analyst expectations on the top line and beat on the bottom line, leaving investors seemingly confused as to where the company is headed. Is TravelCenters undervalued?

Earnings recap
For the quarter ended in late September, TravelCenters' sales climbed marginally from $2.03 billion to $2.06 billion. Wall Street expected more. However the company beat estimates at the bottom of the income statement where it earned $0.53 per share. The number came in lower than 2012's quarter, but it was largely due to interest and depreciation expense, not a decline in the operating business. The large expenses are part of the company's expansion and improvement strategy, pouring money into new locations and renovating existing ones.

During the first nine months of this year, TravelCenters tacked on six new locations and spent an additional $39 million in renovations on locations acquired in the last couple of years.

Clearly, the company plans to grow via incremental acquisitions, but are investors earning an appealing ROI on this use of capital?

Is growth earning its keep?
One good thing going for TravelCenters is an expansion in its fuel margin -- crucial for this line of business. The company is earning around $0.17 per gallon, versus $0.16 in the year-ago quarter. In a tight margin business, a penny goes a long way. Throughout this whole year, TravelCenters has seen its fuel margin expand.

In addition to fuel margin expansion, the company will no doubt continue to grow the top line via new store growth. TravelCenters also has an exciting deal with Shell to provide natural gas stations at up to 100 locations. The trucking industry is moving toward natural gas as a more efficient fuel source, giving TravelCenters an early leg up in the long-term trends.

As mentioned, though, its crucial to understand how much the company is earning on its new stores and whether this is the best allocation of capital. Over the past couple of years, the company has steadily increased its store count, but without substantial earnings or cash flow growth. Until we can see a better return on management's expansion strategy, investors may need to resist the appealing valuation.